Free Online Services Vs. Ad-Supported Continues to Rankle

Venture capitalist Fred Wilson picks up on the ongoing debate about the commercialization of online content and services, arguing that the reason that users like and use free services is because, well, they're free — and that's not a trend he sees is going to change.

To that end, he encourages online businesses to avoid thinking they need to build paid-for services, saying that advertising is not a bad thing since "free is the business model of choice."

His position stands in contrast to a much-discussed July 13 post by entrepreneur Dalton Caldwell, of App.Net, who argues that users might want be willing to buy for services if it will get them out of advertising hell. His self-described "Audacious Proposal," to move away from ad-supported free services, can be found here. Here's what he argues in part:

Contemplate for a moment how scary a theoretical purely ad-supported Dropbox would be. I can easily imagine the overly-cheerful corporate blogpost explaining why placing ads in my personal documents, or selling the file-listing of my music collection to the music industry, or shutting downIFTTT API access is “important to the health and welfare of the community.” I happily pay to avoid that nightmare scenario, wouldn’t you?

When scale matters, when network effects matter, when your users are creating the content and the value, free is the business model of choice. And I don't think anything has changed to make that less true today. If anything, it is more true.

I understand the frustration of certain folks about the commercialization of Twitter, Facebook, Tumblr, and a host of other services. I understand the frustration over the increasing lock down of the APIs and the control these platforms are exercising on their ecosystems. I would encourage folks to compete with them to keep the web, the mobile web, and the Internet free and open. But I would not encourage those same folks to build paid services. I think their goals will be undermined by that choice.